EB-5 investors fund new luxury apartment tower that is currently in construction near Manhattan's Central Park. Once completed, it is set to be the tallest apartment building in the country at 1,550 feet high.
With financing for large developments difficult to obtain, more and more developers are turning to alternative investors. EB-5 investors fund these projects and fill the remaining gap in developer's need.
This new apartment tower, built by Extell Development Co., raised almost $200 million from EB-5 investors ($500,000 from each investor) for construction on the tower. This $200 million, however, is just a small part of the nearly $2 billion budget the project may cost.
Builders and developers are flocking to the EB-5 Program to help attain those last little bit of funding to begin construction on their projects.
The EB-5 Program was developed to encourage foreign investors to invest $1 million in traditional businesses or $500,000 in businesses in rural or high unemployment areas. If foreign investors invest in either of these two kinds of EB-5 projects and they create the requisite 10 jobs for qualified U.S. workers, they then qualify for U.S. unconditional permanent residence (green cards) for themselves, their spouse, and unmarried children under the age of 21.
Some people are critical of the EB-5 Program. They claim that developers are abusing the Program by raising $500,000 from EB-5 investors for projects located in major cities when it should go to projects located in rural and high unemployment areas. Currently, there are no laws prohibiting developers from designing districts that connect certain parts of one city with another, thereby making their own high unemployment area.
Typically, time and time again, the news has shown us that it is not safe for EB-5 investors to invest capital in small or large projects in rural areas. (For example, to read this article: EB-5 Fraud at Jay Peak in Virginia, click here.) For a safer investment, many rightly turn to EB-5 projects in larger cities in more popular industries such as condominiums.
At the moment, there is also a visa backlog for EB-5 investors. Right now only 10,000 visa are allocated each year. This number, however, includes the visas that are given to the family members of the investors, so the amount of investors is actually a lot lower.
With so few visas available, and with the process for approval for taking so long, it's not surprising that many of the larger EB-5 projects are receiving approval before the smaller rural projects. Again, EB-5 investors want to put their investments into projects that will create jobs and return their investment so that they can obtain green cards. That is why larger EB-5 projects in big cities and popular industries are more desirable to investors.
Lifting the visa cap would be one way to get more financing for projects in more rural and high unemployment areas. Additionally, more oversight may be needed for these types of projects, as it seems that rural areas and less popular industries (click here to read about the fraud at the California Proton Center) are more prone to fraud.